US crude has posted sharp losses on Wednesday. In the North American session, WTI/USD futures are trading at $44.80 per barrel. Brent crude futures are trading at $47.02, as the Brent crude premium stands at $2.22. On the release front, US numbers were strong. Crude Oil Inventories showed a surplus of 2.3 million, well above the estimate. The ADP Nonfarm Employment Change came in at 177 thousand, within expectations. Pending Home Sales jumped 1.3%, well above expectations. On Thursday, the US releases unemployment claims and the ISM Manufacturing PMI.
Oil prices continue to point downward, as US crude slipped 3.0 percent on Wednesday, courtesy of a strong reading from Crude Oil Inventories. The indicator surged with a surplus of 2.3 million barrels, well above the forecast of 1.1 million. The ADP Nonfarm Employment Change was little changed in August, posting a gain of 177 thousand. This beat the forecast of 174 thousand, the third straight month the indicator has exceeded the forecast. This release precedes the all-important official Nonfarm Employment Change report on Friday. On the housing front, Pending Home Sales gained 1.3%, well above the forecast of 0.7%, marking a 3-month high.
The US consumer remains optimistic about the economy, according to a key consumer confidence survey. CB Consumer confidence jumped to 1o1.1 points in August, above the forecast of 99.7 points. It marked the indicator’s highest level since September 2015. Recent consumer sentiment indicators have been steady, and if the optimism extends to actual consumer spending, we could see the odds of a rate hike in September or December increase.
The markets are again abuzz over a possible rate increase in 2016, following an upbeat speech from Fed chair Janet Yellen on Friday at the Jackson Hole summit. Yellen’s message to the markets was refreshingly clear, as she said that the case for a rate increase had “strengthened in recent months”. Yellen noted that the key economic indicators were performing well – the labor market was approaching maximum employment, inflation was steady, and consumer spending remained solid. Still, Yellen did not provide any timeline on a rate hike nor did she spell out what the Fed wants to see before pressing the rate trigger. On Friday, Fed members Dennis Lockhart and Stanley Fischer both came out in favor of two rate hikes in 2016, and these comments helped the dollar record broad gains on Friday. The Fed’s stance has raised the odds of a rate move according to the CME Group FedWatch tool, with a September hike priced at 30% in September and 57% for a December hike. However, given that any move by the Fed will be data-dependent, US numbers ahead of the Fed policy meeting on September 21 could significantly change the rate outlook.
WTI/USD Fundamentals
Wednesday (August 31)
- 8:15 US ADP Non-Farm Employment Change. Estimate 174K. Actual 177K
- 9:45 US Chicago PMI. Estimate 54.1. Actual 51.5
- 10:00 US Pending Home Sales. Estimate 0.7%. Actual 1.3%
- 10:30 US Crude Oil Inventories. Estimate 1.1M. Actual 2.3M
Thursday (September 1)
- 8:30 US Unemployment Claims. Estimate 265K
- 10:00 US ISM Manufacturing PMI. Estimate 52.0
*Key events are in bold
*All release times are EDT
WTI/USD for Wednesday, August 31, 2016
WTI/USD August 31 at 12:55 EDT
Open: 47.20 High: 46.40 Low: 44.69 Close: 44.80
WTI USD Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 37.75 | 39.32 | 43.45 | 46.69 | 50.13 | 53.50 |
- WTI/USD was flat in the Asian and European sessions. The pair has posted sharp losses in North American trade
- 43.45 is a weak support line
- There is resistance at 46.69
Further levels in both directions:
- Below: 43.45, 39.32 and 37.75
- Above: 46.69, 50.13, 53.50 and 56.50
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